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How to Leverage Professional Translation for Smarter Investing

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October 11, 2018

Heads of research at hedge funds and deal teams at private equity firms are forgetting to use a weapon hidden in plain sight: translation and transcription.

As the US markets have some of the richest valuations in decades, savvy investors are spotting deals overseas, whether it’s in China, India, or other emerging markets. Like any investment process, due diligence is obviously vital.

Institutional investors are projected to be the largest spenders of $1B on expert network calls from firms like GLG, AlphaSights and Capvision, and several billion on various data platforms like AlphaSense, CB Insights and others. Retail investors tune into earnings calls and scour the web for press releases and company announcements. Bases covered, right?

Not quite. There’s an even more fundamental piece of conducting due diligence that investors rarely consider: the translation of due diligence materials, including oral translation (“interpretation”) and transcription of any meetings or events. How are you going to seek alpha effectively without being able to understand what your targets are saying?

Enter professional interpreters and translators.

I used to work in private equity (Hudson Capital Management) and our due diligence efforts included the usual line items: $800/hour for the lawyer, $750 for a 5-star hotel conference room for meetings, and the $10,000 Gartner market size report. It wasn’t until my first roadshow to China that I realized we were skimping on a critical piece: how to make the most of our meetings with an interpreter. Whether Gartner said the market would grow 5 or 8% annually didn’t really matter. But if the Chinese CEO of our target company struggled to articulate the regulatory challenges in his industry in English, we were missing out on insights.

What I came to realize is that this level of interpretation requires truly highly-trained and skilled professionals at a level of practicing law or complex financial accounting. By not bringing an interpreter, we were effectively putting ourselves at an information disadvantage. And the cost of gaining the upper hand in this due diligence was a fraction of what lawyers would charge us to sit in on a meeting.

What about my bilingual colleague?

For investors who obsess over efficiency and optimal outcomes, it is tragic to see that their default solution to this due diligence problem is one of the most inefficient. It’s my experience that bilingual colleagues get the brunt of this interpretation work. Indeed, in the roadshow I mentioned, we had a junior analyst at the accompanying investment bank act as our de facto interpreter. Maybe they were good at it, but I can guarantee that they do not like it.It’s incredibly disruptive to their own work when they’re constantly being pulled into meetings to interpret. Even if the meeting involves a project they’re working on, have you ever tried to interpret and be an active participant in the meeting at the same time? It’s nearly impossible.

Give time back to your bilingual colleagues to do what they were hired to do.

Spring for UN-style phone interpretation

Got a short attention span? This will help. UN-style interpretation is now available for investors. This is the kind of interpretation where speech is interpreted real-time with no pauses in between. The applications here for due diligence are remarkable; even though it’s a little more expensive, you’re effectively getting the information you need at twice the speed while also doubling the amount of information you can receive in an hour with foreign business partners. For projects where due diligence can take months and require dozens of calls, an increase in efficiency of this magnitude can be a game-changer.

Previously confined to rarefied halls of the United Nations, deal teams can now have more effective calls with management and experts. Supercharge your due diligence calls and don’t look back.

Less notes, more alpha

One last tip to get the most out of your phone calls: let a professional do the note taking.

Investors will pay thousands of dollars to corporate access departments or expert networks for calls, yet the majority of content of those calls disappears into the ether afterwards. When experts talk at 150 words per minute (wpm), the best typists are around 120 wpm, and note taking shorthand doesn’t lend itself well to archiving. That’s why getting a transcriber is essential, even with an interpreter. You’ll be thankful when you have a full transcript of your call (in your native language) for easy reference to every number, company, and technical term mentioned.

A quick note on machine transcription platforms: they’re good, but not great, for this. They tend to stumble when it’s most important: when key brand names or industry-specific jargon is cited.

Innovation in due diligence often comes from many places, but professional interpreters and transcribers remain a criminally underutilized tool in a sector that demands professionalism, precision, and efficiency. Don’t underestimate the untapped alpha that a professional interpreter can bring.

About the author

Matt Conger

CEO of Cadence Translate. Spent several years doing due diligence at Bain & Company and Hudson Capital Management. Lifelong learner currently focused on Salesforce, Python and Hearthstone. Lived/studied in Philadelphia, Palo Alto, New York and Beijing.

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